On 31st March 2013, the Balance Sheet of A, B and C who share profits and losses in proportion to their capitals, stood as follows: BALANCE SHEET as at 31st March 2013 Liabilities Assets $ Bank Overdraft 15,000 20,750 65,000 16,000 Bank Balance 27,500 12,000 27,000 55,000 Loan Payable Debtors Creditors Stock Bills Payable Capital Accounts: Plant & Machinery Leasehold 15,250 30,000 15,000 20,000 15,000 1,66,750 Factory Building 1,66,750 B retired on that date and the following adjustments were : (a) Goodwill of the entire firm to be fixed at $30,000 and B's share of the same be adjusted into the accounts of A and C. (b) Factory Building to be appreciated by 15% (c) Reserve for Legal Charges to be made at $300 and Stock to be appreciated by 6% (d) Plant and Machinery was decreased by 10% (e) To provide a Reserve of 5% on Debtors for Doubtful Debts (f) Out of insurance which was debited to profit & Loss account, $ 1,000 to be carried forward as Unexpired Insurance. (g) The Total Capital of the new firm is fixed at $80,000 and is to be distributed in such a manner so as to make the Capital of remaining partners in new profit sharing ratio which is equal. Adjustments to be made through current accounts. Prepare Revaluation Account, Partners' Capital Accounts ABC
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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